HRG: Corporate Hotel Rates Increase In Most Major Cities - Business Travel News

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HRG: Corporate Hotel Rates Increase In Most Major Cities

January 31, 2013 - 03:15 PM ET

By Michael B. Baker

Moscow, Lagos and New York are the world's most expensive cities for corporate hotel programs, according to a biannual report released Thursday by Hogg Robinson Group. The travel management company uses a combination of actual room nights booked by HRG clients and industry intelligence to create the report.

The Russian capital has been the priciest city for nine years now, and 2012 corporate hotel rates in local currency increased by 5 percent year over year. In New York, rates increased by 2 percent. Rates were flat in the Nigerian city of Lagos, where some new properties opened but "most corporate visitors use five-star hotels," according to HRG, as "security remains a major concern for business travelers in Africa, especially in Lagos."

The world's largest corporate hotel rate percentage increases occurred in Rio de Janeiro (19 percent) and São Paulo (15 percent), although currency fluctuations negated the overall effect on international corporate travelers. Hotel room rates throughout Latin America have "increased significantly as business travelers turn their attentions to the lucrative opportunities in the region," according to HRG.

Corporate hotel rates generally rose in major U.S. cities, particularly San Francisco (10 percent), Atlanta (8 percent) and Houston (7 percent). San Francisco and Atlanta each benefited from several citywide conventions and little supply growth, while Houston was boosted by the strong oil and energy industries. Rates in Washington, D.C., however, plummeted by 14 percent due to decreased corporate demand.

"In North America, hotels approached negotiation season with a very bullish attitude, leading to high rate rises," according to HRG. "Hotels are also paying more attention to cancellation deadlines, which is placing a further squeeze on rates. With a lack of openings due to the major groups focusing on other parts of the world, the squeeze on rates is likely to continue."

The picture was mixed in Europe. Corporate hotel rates largely decreased in cities in countries with fragile economies, including Dublin (down 4 percent) and Athens (down 7 percent), or were volatile. In Barcelona, for example, year-over-year hotel rates were down 39 percent in the first quarter of 2012 but up 32 percent in the last quarter. Other cities had modest rate growth, including Berlin (5 percent), London (5 percent) and Frankfurt (4 percent).

Hong Kong remained the most expensive city in Asia and the fourth-most expensive in the world despite corporate hotel rates in 2012 changing little year over year. Corporate hotel rates dropped in several Indian markets, including Bangalore (down 12 percent) and New Delhi (9 percent), a combination of a slowing Indian economy and increased supply, along with switches by several corporations to house travelers in serviced apartments instead of hotels.

Corporate hotel rates in Beijing rose 3 percent, a more moderate increase than in past years, as the city becomes a "relatively well-served and mature business travel destination," according to HRG. Rates decreased by 7 percent in Shanghai as a result of the glut of hotels built for the 2010 World Expo.

In the Middle East, Dubai was the most expensive city and saw corporate hotel rates increase by 2 percent.

"After several years of decline, room rates in Dubai are increasing as business travelers are now beginning to return," according to HRG. "With many high-profile hotel projects effectively mothballed over the past two years, the lack of new capacity has now begun to squeeze supply. Several new hotel openings in quarter four eased the pressure on existing capacity, but issues of availability are still particularly acute in the long-stay corporate apartment sector."

Corporate hotel rates largely decreased across the rest of the region, particularly in Abu Dhabi (down 11 percent) and Istanbul (down 10 percent). Istanbul has suffered from increased supply and a drop in demand due to unrest in its neighbor Syria, HRG reported.

On the whole, corporate hotel rates in 2012 increased by 1.4 percent globally and rose in 32 of the 55 cities with the highest hotel rates, according to HRG.

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